Commodity markets are in a ‘super squeeze’ — and higher prices could be here to stay
SUIXI, CHINA – DECEMBER 30: An employee works on the production line of aluminum foil at a workshop of Anhui Limu New Material Technology Co., Ltd on December 30, 2023 in Suixi County, Huaibei City, Anhui Province of China. (Photo by Li Xin/VCG via Getty Images)
Vcg | Visual China Group | Getty Images
Global commodity markets are in a “super squeeze” amid supply disruptions and lack of investment — and it’s only going to get worse as geopolitical and climate risks exacerbate the situation, HSBC said.
“For some time now we have described global commodity markets as being in a ‘super-squeeze,'” its chief economist Paul Bloxham told CNBC.
A commodity “super squeeze” is denoted by higher prices driven by supply constraints more than a robust growth in demand, he explained.
“If it’s a supply constraint that’s driving high commodity prices, it’s a very different story for global growth,” said via Zoom. Higher prices as a result of a super squeeze are “not as positive.”
“We see the deeper ‘super-squeeze’ factors on the supply-side as still set to play a key role in keeping commodity prices elevated,” he said, outlining factors like political uncertainties, climate change and the lack of investments into the green energy transition.
The super squeeze could be deeper, or more prolonged if geopolitical, climate change or energy transition related supply disruptions are larger than expected.
Paul Bloxham
HSBC chief economist
Geopolitical risks include the ongoing Israel-Hamas conflict in Gaza and the Ukraine war, which have hampered global trade, as seen in shipping disruptions from the recent Houthi attacks in the Red Sea.
Another reason is climate change, which disrupts supply chains as well as commodities supply, especially in the agricultural space.
“The super squeeze could be deeper, or more prolonged if geopolitical, climate change or energy transition related supply disruptions are larger than expected,” he added.
Lack of investments
The world’s pursuit of a net-zero carbon future is fueling demand for energy transition metals such as copper and nickel, Bloxham pointed out.
However, there are insufficient investments allocated to procuring these critical minerals, leading to a sharper supply squeeze on energy transition metals — in particular copper, aluminum and nickel, he said.
As energy transition ramps up, markets could be looking at a shortage of a slew of metals like graphite, cobalt, copper, nickel and lithium in the next decade, the Energy Transitions Commission said in a report in July.
At the recent COP28 climate change conference, more than 60 countries backed a plan to triple global renewable energy capacity by 2030, in what is largely deemed as a step forward for energy transition and a further boost in demand for metals required for that transition.
“Large-scale mining projects can take 15-20 years, and the last decade has seen a lack of investment in exploration and production for key energy transition materials,” the report said.
Annual capital investments in these metals averaged $45 billion in the last two decades, and must rise to around $70 billion each year through to 2030 to ensure an ample stream of supply, according to the ETC report.
Commodities are notoriously volatile asset classes, with a long history that is prone to a short squeeze and the current landscape points to more of the same.
Brian Luke
S&P Dow Jones Indices
Without more investment in new capacities, supply will be constrained, HSBC’s Bloxham said, adding that “for any given amount of demand,” it should be expected that commodity prices will stay more elevated than in the past.
“That seems to be playing out across many of the commodities at the moment.”
Technology could also be a gamechanger if a development came along and made it much easier to extract the metals used in the battery space, Bloxham added.
Iron ore site in Australia.
Ian Waldie | Bloomberg via Getty Images
He did not say how long it will take global commodity markets to move out of the squeeze, but one way out of it — which would also push commodity prices lower — is a “bigger and deeper [economic] downturn globally,” he said.
“Commodities are notoriously volatile asset classes, with a long history that is prone to a short squeeze and the current landscape points to more of the same,” said Brian Luke, senior director and head of commodities at S&P Dow Jones Indices. He highlighted that extreme weather events and geopolitics have also impacted the agricultural and energy commodity baskets.
Metals most impacted
Analysts say metals will likely see the most upside.
Bloxham noted that aside from clean energy metals, iron ore was also on his list due to falling inventory and a lack of investments into expanding capacity.
Iron ore has seen a price jump of over 24% in the last year, according to data from FactSet. The benchmark 62%-grade iron ore last traded at $135.48 per ton.
“The reason why [iron ore] has a sudden squeeze-up is because inventory has been very low,” said Bank of America Securities’ head of Asia -Pacific basic materials, Matty Zhao.
She noted that in spite of China’s property crisis, steel production has continued, fueling demand for iron ore and coking coal, which are integral to steelmaking.
China, which makes around 55% of the world’s steel, produced 874.7 million tons of steel in the first 10 months of 2023 — up 1.4% across the same period in 2022.
What squeeze?
While risks remain, one analyst is of the view that commodity markets are still “adequately supplied” for the most part.
“The commodity markets are currently focused on slumping demand due to the sluggish global economy. As such, there’s not too much concern about supplies,” said Arlan Suderman, chief commodities economist at financial services firm StoneX.
Oil, for one, saw an increase in global oil inventories in 2023.
Some are still hoping that a rebound in Chinese demand will help.
“A resurgence from Asia will go a long way in determining if commodities will have a breakout year,” said S&P’s Luke, adding that 2023 saw a year of unfulfilled demand from China which weighed heavily on commodity markets.
The US Department of Energy (DOE) today announced $1.2 billion in financing to replace Puerto Rico’s fossil fuel plants with solar and battery storage through 2032.
The DOE’s Loan Programs Office announced two conditional commitments and one loan closing to power producers in Puerto Rico. Each supports a project contracted with the Puerto Rico Electric Power Authority. The announcements include:
- The closing of a $584.5 million loan guarantee to subsidiaries of Convergent Energy to finance a 100 MW solar farm with a 55 MW (55 MWh) battery energy storage system (BESS) in the municipality of Coamo and BESS installations in the municipalities of Caguas (25MW/100MWh), Peñuelas (100MW/400MWh), and Ponce (up to 100MW/400MWh)
- A conditional commitment for a loan guarantee of up to $133.6 million to a subsidiary of Infinigen for a 32.1 MW solar farm with an integrated 14.45 MW (4.76 MWh) BESS, and a co-located standalone 50 MW (200 MWh) BESS expansion in the municipality of Yabucoa
- A conditional commitment for a loan guarantee of up to $489.4 million to a subsidiary of Pattern Energy for three stand-alone BESS in the municipalities of Arecibo (50 MW/200 MWh), and Santa Isabel (50 MW /200 MWh and 80 MW/320 MW), and a 70 MW solar farm with an integrated BESS in the municipality of Arecibo.
If all are finalized, these projects would more than double LPO’s support for utility-scale solar generation and battery energy storage in Puerto Rico.
LPO provides low-cost financing and a rigorous due diligence process, making it a valuable resource for Puerto Rico as it works to rebuild an affordable, reliable, and clean energy system. As a result of reliance on imported fuel, the persistent threat of tropical storms, and underinvested infrastructure, Puerto Ricans today face average energy costs that are twice the US average – all while consuming only one-quarter of the energy of the US per capita.
LPO’s initial loan to a power producer in Puerto Rico, Project Marahu, closed in October 2024, and when complete will add more than 200 MW of solar and up to 285 MW of stand-alone energy storage to Puerto Rico’s grid.
Through its September 2023 partial loan guarantee to Project Hestia, LPO also supports virtual power plant (VPP)-ready rooftop solar and battery storage installations in Puerto Rico. As a nationwide project, Hestia’s sponsor is committed to at least 20% of installations under Project Hestia going to homeowners in Puerto Rico.
As part of its procurement plan, Puerto Rico Electric Power Authority seeks to install 1,500 MW of battery storage and requires a minimum capacity of storage to be co-located with each utility-scale solar project. Energy storage systems currently online in Puerto Rico are being dispatched every day.
When including Marahu, LPO’s closed and conditionally committed financing supports over 100% of the capacity Puerto Rico Electric Power Authority aimed to procure under its initial request for energy storage project proposals, the first of six.
Read more: Cleantech investments to top fossil fuels for the first time in 2025
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Chevy just introduced new deals on the Equinox and Blazer EV models to make them even more affordable. With 0% interest and a new trade-in bonus, Chevy is offering over $5,000 in savings.
Chevy adds new Equinox and Blazer EV deals in January
Although the Chevy Equinox EV is already “the most affordable” EV in its class with over 315 miles range, it’s getting even cheaper.
Earlier this week, Chevy launched new deals on the 2024 Equinox and Blazer EV models. According to a note sent to dealers, viewed by CarsDirect, the electric SUVs are now available with 0% APR financing for 60 months. You can also choose from 0.9% AP for 72 months and 2.9% APR for 84 months.
This marks the best financing offer on Chevy’s newest EVs to date. The previous best rates were 0.9% APR for 60 months, 3.9% for 72 months, and 5.9% for the longer 84-month option.
On a 7-year $45,000 loan, online auto research firm CarsDirect estimates the new deals amount to around a $5,200 price cut. The lower APR rates are already offered on the Chevrolet Silverado EV pickup.
In addition, Chevy is offering a trade-in bonus of up to $3,000 on the Silverado EV and $1,000 on the electric Equinox and Blazer models. If you choose to lease, the bonus is cut in half: $1,500 for the Silverado and $500 for the electric SUVs.
Chevy’s new EV deals started on January 14 and run through March 3, 2025. The deals come as rivals like Hyundai and Ford recently launched new EV promotions.
On Thursday, Hyundai launched a new promo on the upgraded 2025 IONIQ 5, which includes monthly leases as low as $199 and a free ChargePoint home EV charger (or $400 charging credit). Meanwhile, Ford extended its “Power Promise” program earlier this month, which also includes a free home charger, among several other benefits.
The 2024 Chevy Equinox EV started at $41,900 with up to 315 miles range. Prices for the electric Chevy Blazer start at $43,690 with up to 279 miles range.
If you are ready to try out Chevy’s new electric SUVs for yourself, we’ve got you covered. You can use our links below to view offers on the Chevy Equinox, Silverado, and Blazer EV models near you.
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In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss non-Tesla EVs getting Supercharger access, Cybertruck sales in the spotlight, Rivian getting some money from Biden, and more.
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